Under intensifying pressure to relocate manufacturing to areas of cheaper labor, the challenge facing many traditional manufacturing locations in the United States and Western Europe will be to transform or close.

In the 1980s, the West prepared for a manufacturing revolution. Japanese innovations of smoothly integrated production processes and advances in automation led U.S. and European companies to believe that a new dawn beckoned. In factories, it was predicted that manual labor would be widely replaced by machines to create “lights-out” facilities; and “lean production” systems would yield double-digit productivity improvements, allowing Western manufacturers to fend off low-cost competition from places like Japan and Taiwan.

In the United States, these predictions were accompanied by a flurry of activity. Many large companies started in-house programs to develop optimum production approaches. By the 1990s, university programs like the Leaders for Manufacturing (LFM) program at the Massachusetts Institute of Technology and the Master of Management and Manufacturing (MMM) at Northwestern University were established to train the best and brightest in emulating Japanese manufacturing principles. Business publications featured more articles about manufacturing than ever before. The factories of the future, they confidently proclaimed, would hum with best practices.

The predictions came true — but only in a very few plants, and typically those built on greenfield sites. Almost all the top-performing plants in the West today were established after 1985; lean manufacturing capabilities were embedded in them from the start. For example, Nissan and Toyota opened numerous greenfield plants in the U.S. and England in the last couple of decades and set new records for productivity. Yet in the industrial heartlands of North America and Western Europe, manufacturing plants commissioned before that year — the so-called brownfield sites — have proved largely resistant to change.

Now, the pressure on Western manufacturing is intensifying once more. Companies are increasingly tempted to move manufacturing operations to new plants in low-cost countries — or buy from suppliers that have already done so — in order to take advantage of greenfield operational capabilities and cheaper labor. Moreover, a more open regulatory environment in China has put that nation’s vast consumer base within reach for Western manufacturers, who cannot afford to ignore the potential markets there or in other newly emerging regions like India and Eastern Europe.

The effects are already being felt in the West. In 2005, 10 times as many manufacturing jobs disappeared to the East each month as did in 1985. These job losses have shaken trade unions in North America and Western Europe. Once fiercely opposed to anything but full employment, unions are slowly facing up to the need for more flexible working practices to forestall more pain among their membership.

Clearly, the imperative to transform established manufacturing plants in North America and Western Europe has never been more pressing. Our research suggests that a 15 to 30 percent cost improvement is achievable and, at least in the short term, would be enough for most languishing plants to fend off Asian competitors. However, this optimistic assessment is more than offset by the stubbornly large gap in operational performance between excellent and average factories in the West.

So, if the potential efficiency gains exist and management has the will — and the need — to make it happen, what will it take to transform the brownfield plants?

There has been no shortage of initiatives intended to revive established manufacturing locations in North America and Western Europe. But the failure rates for plant turnaround in these areas are striking. Few manufacturing professionals today have any difficulty describing their vision of how excellent factories should operate. They are highly knowledgeable about the leading manufacturing techniques. Knowing the theory is one thing, of course; making it work in practice is quite another. Despite the fact that practically all of the relevant elements have been public knowledge for nearly 20 years, few brownfield plants have successfully made the transition to lean manufacturing.

Jeffrey Rothfeder and Georgina Grenon, editors, Manufacturing Realities: Breaking the Boundaries of Conventional Practice (strategy+business Books, 2006): The book from which this article was adapted offers a set of solutions for the crisis facing manufacturing today. Click here.

James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine That Changed the World: The Story of Lean Production (Harper Perennial, 1991): Likely the most influential book on lean production ever published. Click here.

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